Thousands of drugstores to combine with millions of insurance company members…
(Los Angeles Times) Shares of CVS Health and Aetna fell Monday morning after Sunday’s announcement of its $69 billion deal for pharmacy company CVS to acquire health insurer Aetna.
CVS shares were down 4.9 percent at $71.45 in early trading. Shares of Aetna were down 0.5 percent at $180.40 after an early morning jump.
The deal would combine the 9,700 drugstores and more than 1,000 walk-in health clinics operated by Woonsocket, R.I.-based CVS with Hartford, Conn.-based Aetna’s 22 million medical members. It’s the latest example of the increasing consolidation of the health care industry and, in CVS’s case, a way to help fend off the potential threat posed by Amazon.com, which is looking to move into the pharmaceuticals business.
CVS CEO Larry Merlo described the deal as a “natural evolution” of the two companies and said CVS and Aetna have been “close partners” for most of the past decade, since CVS signed a strategic agreement to provide pharmacy benefits to Aetna members.
“Through our integrated health care management and delivery platform, we will be able to better coordinate care, eliminate waste and unnecessary spending and drive efficiencies throughout the entire health care system,” he said in a call with analysts Monday morning.
Merlo said the combined company would be better equipped to go after more government business in Medicare and Medicaid. Aetna CEO Mark Bertolini later expanded on Merlo’s comments, saying the deal could help patients navigate the system and lower out-of-pocket costs.
“I think really people are confused,” he said. “They’re wandering through the system, multiple doctors, multiple medications.”
The deal still needs approval from federal antitrust regulators. This year, Aetna dropped a $34 billion bid for rival insurer Humana after a federal judge blocked the deal on antitrust grounds.
An analyst said the CVS-Aetna combination should have a better chance of getting through because the two companies’ businesses have little overlap.
“We also believe that the Trump administration is more business-friendly” and that regulators may view a CVS-Aetna deal “as a way to continue to put pressure on manufacturers and drug prices,” David Larsen, an analyst at Leerink Partners, said in a note.
Still, the Justice Department recently sued to block AT&T’s plan to buy Time Warner, which, like CVS and Aetna, would be a “vertical” combination because the firms are in largely different businesses.
If regulators approve the deal, it would close in the second half of 2018.
Under the terms of the deal, Aetna would continue to be run by its existing management team and would operate as a stand-alone business in the combined company.
Republished with permission from the Los Angeles Times via iCopyright license.